U.S. Tells Germany to Drop Huawei or Face a Cut in Intelligence Sharing

If Germany builds its 5G network using Huawei (HUAWEI) technology, the U.S. will limit the intelligence it shares.

That was the message delivered by Washington’s ambassador to Berlin, Richard Grenell, in a letter to German economics minister Peter Altmaier, The Wall Street Journal reported Monday. The correspondence added that if Germany uses Huawei or any other form of Chinese equipment in its next-generation mobile network the U.S. would not be able to maintain its current levels of security cooperation.

“The Americans will assume that everything we share with Germany will end up with the Chinese,” a senior State Department official told WSJ.

Along with most European countries, Germany’s security agencies are heavily reliant on U.S. intelligence to fight terrorism. While the U.S., Japan and Australia have recently banned Huawei technology from their 5G networks, Germany has not followed suit. Instead, it has introduced an inspection scheme that analyses the equipment, while Huawei has offered to let the federal IT ministry analyze its source code. Problem is, some data security experts believe Germany’s IT ministry is unlikely to be able to detect well-hidden malfeasance.

This is crucial because many intelligence agencies suspect Huawei’s equipment could be used as a conduit for Chinese spying, though there’s no clear evidence that this has happened and Huawei denies the accusations. The U.S. already has a ban on Huawei and ZTE (ZTCOY) equipment being used by federal agencies and recipients of federal funding. It also recently hit Huawei and its CFO with charges of bank fraud, obstruction of justice and intellectual property theft. Huawei struck back with its own lawsuits against the U.S. government.

In many ways, Germany’s decision stems from the fact that it doesn’t want to alienate China, which is a hugely important export market. Berlin also worries that banning Huawei could delay the development of its 5G infrastructure — particularly, as the country’s 5G spectrum auction is scheduled for later this month.

This is also not the first time Grenell has meddled in German politics: in January, the ambassador threatened that the U.S. would introduce sanctions against companies participating in the Nord Stream 2 pipeline between Germany and Russia and called out Europe’s mechanism to allow trade with Iran.

Meanwhile, Germany’s Siemens (SIEGY) just beat Huawei to the title of Europe’s most prolific patent filer in 2018. The Munich-based firm made 2,493 filings with the European Patent Office, compared to Huawei’s 2,485. The Chinese tech giant ranked No. 1 in 2017 for the first time ever, filing 2,398 patents, compared to Siemens’ 2,220.